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UAE Central Bank Expects GDP to Grow 2.5% in 2021, 3.5% in 2022

UAE Central Bank (WAM)
UAE Central Bank (WAM)
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UAE Central Bank Expects GDP to Grow 2.5% in 2021, 3.5% in 2022

UAE Central Bank (WAM)
UAE Central Bank (WAM)

UAE's GDP growth is forecast to pick up to 2.5 per cent and 3.5 per cent, respectively in 2021 and 2022, according to a recent report by the Central Bank of UAE (CBUAE).

The country’s non-oil GDP will grow by 3.6 percent during this year and will reach 3.9 percent in the upcoming year.

The Central Bank had confirmed that the targeted comprehensive economic support plan has achieved remarkable positive results within a year since its launch, paving the way for the strong recovery from the repercussions of the Covid-19 pandemic.

The bank also launched two new payment system regulations aiming to promote robust financial infrastructure, which is essential for financial stability and consumer protection.

The two systems, the Large-Value Payment Systems (LVPS) Regulation and the Retail Payment Systems (RPS) Regulation, also facilitate the UAE’s international competitiveness.

Governor Abdulhamid al-Ahmadi remarked that payment systems are the “plumbing of the financial system” a critical part of any country’s financial infrastructure.

Ahmadi asserted that the issuance of the two regulations is an important milestone to reach the objective of providing robust, efficient, and accessible financial infrastructure in the UAE, serving the financial institutions, corporations, and people, and supporting the country’s competitive economy.

“The large value and retail payments systems regulations will help facilitate smooth, secure, and efficient conduct of transactions. The retail payments regulation will also provide a level playing field to advance innovation and competition, and financial inclusion.”

The LVPS regulation sets standards for financial infrastructure systems that support wholesale payment activities in the UAE.

As for the RPS regulation, it focuses on systems for retail payments, which provide funds transfer, clearing, and settlement services related to retail activities. The regulation covers all retail payment systems irrespective of currency or means of exchange in which the transactions are conducted.

The Bank explained that system operators and settlement institutions of existing large-value payment systems and retail payment systems operating in the UAE must comply with the requirements of these two regulations by the end of February 2022.

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After Trump’s Victory, Arab Demands for Competitive Advantages Due to Regional Tensions

Donald Trump addresses his supporters at the West Palm Beach Convention Center in Florida on Wednesday. (EPA)
Donald Trump addresses his supporters at the West Palm Beach Convention Center in Florida on Wednesday. (EPA)
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After Trump’s Victory, Arab Demands for Competitive Advantages Due to Regional Tensions

Donald Trump addresses his supporters at the West Palm Beach Convention Center in Florida on Wednesday. (EPA)
Donald Trump addresses his supporters at the West Palm Beach Convention Center in Florida on Wednesday. (EPA)

With the election of Donald Trump as US president, the global economy has gained direction for the coming years. Trump’s policies favor corporate tax cuts, increased investment, and expansionary monetary policies. He also promotes local production to boost job creation, which involves imposing significant tariffs on trade partners, particularly in Asia. This approach could trigger a trade war, affecting inflation in both the US and worldwide.

The US economy is already grappling with high prices, slower economic growth, and rising unemployment, alongside a national debt nearing 99% of GDP. This backdrop underscores the importance of economic issues in the recent election.

For the new US administration, domestic concerns will not be the sole priority. Ongoing geopolitical tensions, especially recent Middle Eastern conflicts, will also impact the US economy. To gain regional insights, Asharq Al-Awsat consulted economists from various Arab nations on their expectations and requests from the US president regarding the Middle East.

Priority of Regional Stability

Dr. Mohamed Youssef, an Egyptian economist, emphasized that regional stability is crucial, benefiting the economy and paving the way for resolving complex issues like the Nile Dam dispute affecting Egypt. He highlighted the American role in fostering calm in the region.

Iraqi economist Durgham Mohamed Ali noted that US relations vary across the Middle East; while Lebanon and Yemen remain outside current US alliances, Sudan and Somalia require international aid to rebuild infrastructure.

Competitive Advantage for Arab Countries

Ahmed Moaty, a global markets expert from Egypt, suggested that reduced US tariffs would improve Arab economies’ competitiveness. However, he pointed out the American high debt could motivate the administration to impose tariffs to protect local industries and reduce imports. Ali observed that US tariffs are interest-driven and selective, favoring allies like Japan, Taiwan, and South Korea while being stringent toward BRICS members, such as China, Brazil, and South Africa. He linked tariff policies to regional geopolitics, especially the conflicts involving Israel, Lebanon, Palestine, and Iran, which could influence US economic decisions.

Dr. Mohamed Youssef also argued that easing US-China competition could benefit the global economy, as high tariffs on Chinese goods reduce China’s growth, decreasing demand for key commodities like oil.

Ibrahim Al-Nwaibet, CEO of Saudi Arabia’s Value Capital, predicted that a Republican win could positively impact oil and interest rates, revitalizing the petrochemical and trade finance sectors.

On currency, Moaty noted the strong US dollar pressures emerging markets, especially in the Middle East. He suggested offering US Treasury bonds with higher yields to Arab countries as a counterbalance. Ali added that the dollar’s strength poses challenges for countries heavily reliant on US currency amid global liquidity shortages.

The BRICS Bloc

Ali also mentioned the high levels of US debt, explaining: “In general, the entire world is concerned about rising US debt, slowing growth rates... and is wary of the BRICS alliance, which some Arab countries hope to join. The question remains whether a cold economic war will ensue.”

Youssef also discussed the BRICS, which could play a role in attracting the new US president’s attention to countries joining the alliance. He added: “This may provide new competitive advantages for countries in the region, particularly as countries like Egypt, the UAE, and Iran recently joined BRICS, while Saudi Arabia is still evaluating the benefits of such move.”